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Headlines
- Cocoa prices fell on Tuesday due to expectations that increased payments to Ghanaian farmers might lead to higher global cocoa supplies.
- Production issues in the Ivory Coast and a reduction in Ghana’s production estimates support higher prices, despite recent declines.
- Strong demand and a global cocoa deficit forecast by the ICCO provide support for the cocoa market, even as production increases in Cameroon and Nigeria.
On Tuesday, December ICE NY cocoa (CCZ24) closed down 2.73%, and December ICE London cocoa #7 (CAZ24) fell by 4.68%. This decline is attributed to the anticipation that the Ghana Cocoa Board's plan to raise payments to cocoa farmers will reduce the incentive for them to withhold supplies and encourage greater investment in production, which may impact consumer stocks in the cocoa sector. The proposed price increase is 65%, bringing the payment to $3,488 per ton for the 2024/25 season.
Production issues in the Ivory Coast, the largest global cocoa producer, are influencing cocoa prices. Data released on Monday revealed that Ivory Coast cocoa shipments from October 1 to September 8 were down 28% compared to the previous year. This reduction in production supports higher prices, given the tighter global supply.
Cocoa inventories monitored by ICE in US ports have been declining for 15 months and hit a 15-year low of 2,331,003 bags on Tuesday. Additionally, concerns about dry conditions in West Africa have contributed to price support, as reduced rainfall has affected crop growth. The Ghana Cocoa Board's revised production estimate for 2024/25, now at 650,000 MT, reflects these challenges.
An increase in cocoa production in Cameroon and Nigeria presents a counterbalance, with Cameroon’s output rising 1.2% year-on-year and Nigeria’s cocoa exports up 31% year-on-year in July. Despite these increases, cocoa prices are bolstered by strong demand. Recent reports indicate higher-than-expected grindings in North America and Europe, and a smaller decline in Asia.
The International Cocoa Association (ICCO) has updated its global cocoa deficit forecast for 2023/24 to 462,000 MT, up from May's estimate. Additionally, ICCO has revised the production estimate down to 4.33 MMT and projects a 46-year low in the global cocoa stocks-to-grindings ratio of 27.4%. These factors contribute to ongoing support for cocoa prices amidst a complex market landscape.
